What's being lost in the discussion of the EU's threatened retaliatory sanctions against U.S. goods are two things. First, these sanctions are the direct result of a stupid, stupid gamble by neo-conservative zealots. Second, the Bush administration is in the process of getting a global
wedgie for its gamesmanship.
A bit of background. I'm a semi-unemployed lawyer with a huge interest in international law. So, my take on this very complex and arcane question is vastly different than most cheerleaders masquerading as journalists.
The U.S. has been twisting arms around the world for countries to drop tariffs since 1947. The winning Allies set out a bunch of agreements called the Bretton Woods Agreements, among which was the General Agreement on Tariffs and Trade (GATT) which eventually grew into the World Trade Organization (WTO) during the 1980s. WTO is really just a bigger, meaner version of the GATT, complete with tough enforcement "teeth." The central idea of both GATT and WTO is to require countries to limit their tariffs on goods to a specified maximum.
President Bush determined in March 2002 that because of "unforseen developments," the United States would be exempt from these hard-fought rules, and placed tariffs of up to 30% on steel imported from every steel-producing country, except for Mexico, Canada, Jordan, and Israel.
What were the "unforseen developments?" Good question. Perhaps it was unforseen that someone might stand up to Team W. But I digress...
The Bush administration claimed at the time that there were "increased imports causing serious injury to the relevant domestic industry." Under the GATT/WTO rules, proof of the "serious injury" is required and that proof has to be something that shows the increased market share by imports was the LEADING CAUSE of that "serious injury."
According to the WTO dispute resolution body in July, 2003, neither of these prerequisites existed--the U.S. was confusing cause and effect. In other words, just because steel manufactured in the U.S. is being increasingly outsold by foreign steel doesn't amount to a "serious injury" caused by imported steel. Even if it did, the WTO reasoned, that doesn't allow the U.S. to exempt itself from the rules everyone else plays by. The appellate body agreed on November 10.
Adding insult to injury, the price of steel has gone up for EVERYBODY. A delicious moment of blowback for U.S. up-is-downism is the fact that higher steel costs are choking all consumers of steel. According to BBC News,
Jim Zawacki, the president of GR Spring and Stamping in Grand Rapids, Michigan, says his costs went up by 40%.
"My prices have gone up. My profits have gone down. In my industry, people are closing. We've had four stampers close their doors since the start of the tariffs," he said.
Or take the case of the Morgal Machine Tool Company in Springfield, Ohio which has laid off workers because of the tariffs.
It makes pulleys and sprockets - though not like it used to.
Before the tariffs, it would import steel to the US, then process it. Now it imports to Canada and processes there, according to Jim McGregor who runs the company:
"What happens is that the steel lands in Canada instead of America. They blank the part out in Canada, and ship the parts to the United States. When the part comes across the border there's no 30% tariff on the steel," he explains.
Now the EU, Brazil, China, New Zealand and all the others have every right to retaliate under the tough WTO rules (remember those enforcement teeth??). According to reports coming out of Europe I've been reading since last summer, and repeated in the NYT and BBC articles cited above, EU retaliation will be targeted closely at U.S. firms in states Bush needs to win in the 2004 presidential election. Textiles and furniture in the Carolinas and Georgia. Harleys in Wisconsin. Paper products from the midwest. I can just hear the howler monkeys scream about this.
Team W is begging for a HUGE GLOBAL WEDGIE on this one. It was a stupid, unwinnable argument and now the U.S. has lost. The EU and others have an absolute right to retaliate. But, last time the Europeans tried to act tough, we got "freedom fries" and idiots pouring French wine into the sewer. I think if the EU just backs down and doesn't stand up to this bully, we will have turned an important, and very sad corner.